The Myth of the Irreplaceable REALTOR

Over on the Texas Association of REALTORS website, there’s a reprint of an article from the December 2015 issue of REAL Trends entitled “Why technology will never replace REALTORS.” I’ll wait for the cheering to die down a bit. OK. Good? OK, moving on then.

Steve Murray, who is one of my heroes in the industry, basically pooh-poohs the astronomical valuations of Zillow and other tech companies and defends the unique value proposition of REALTORS:

Wall Street and Silicon Valley have been assaulting the residential brokerage industry for nearly 20 years. They cannot figure out why an industry that is so fragmented, so inefficient (from their point of view), and so ripe for their financial alchemy and smarts can’t be conquered. We talk to many investors who represent huge sources of capital, and the conversation inevitably leads to “Why can’t real technology do to brokerage what it has done to so many other businesses?” Why can’t the capital and the smarts of Wall Street and Silicon Valley figure out how to disrupt residential brokerage and drive huge valuations for their efforts? After all, it has worked almost everywhere else.

The answer we tell them is the unique nature of homebuyers and sellers and their relationship with real estate agents and brokers. A transaction that is infrequent, complex, and fraught with downside when things go wrong drives consumers to use someone who knows how to reduce their fears, doubts, and threats and help them get a result they want: the smoothest transaction possible. And, in great part, the industry does deliver that.

Thing is, I know for a fact that Steve Murray knows his last sentence is a great giant hope-filled donut of a hyperbole. I know because I’ve been on stage with the man when he talked about the grave dangers to the industry that comes from the countless legions of “Facilitators” who don’t know what they’re doing, are not experts, and just care about cashing the commission check to the relatively small number of “Counselors” who do all those things Murray just talked about.

Fact of the matter is, in great part the industry does not deliver that. The DANGER Report did not get written in a vacuum, and yours truly, the favorite doomsayer of the industry, did not write it. Happy, sunny, jovial, and optimistic Stefan Swanepoel did the research and wrote it. And that report’s #1 conclusion:

I would like to propose a modified title for Steve Murray’s article: “Why technology will never replace some REALTORS.” Then I’d like to follow that up with this post here:

If technology can’t do it, then somebody has to replace a whole boatload of REALTORS.

Technology Can, In Fact, Replace Quite a Few REALTORS

First of all, let’s be honest here for a moment. Technology can easily replace quite a few REALTORS.

I wasn’t making it up when I said I’ve been on stage with Steve Murray when he talked about the conflict between Counselors and Facilitators. Mainstreet Organization of REALTORS posted a fairly lengthy report on Murray’s talk on this topic. Read it in full.

Murray thinks that Counselors have higher production on average, invest in their skills, training, systems, and work to advance their expertise. They understand the market, the community, and the transaction process as a whole. They bring more value to the transaction and to the client, because they are mentally engaged to work better and to deliver higher quality service.

Facilitators on the other hand, says Murray, “can process a sales transaction well but are not in position to add more value from a consulting standpoint.” He thinks Facilitators are not engaged in the business, don’t invest the time and energy to grow their business, advance their expertise, or to improve their skills. They don’t adopt technology as readily. And this is the killer money quote:

Because of their lack of expertise, they are not in a position to offer as much in the way of true guidance to their clients and customers.

They generally lack transaction experience and are not skilled in the details of either the market or the transaction.

Murray thinks, and I sort of agree, that “of the 1.1 million REALTORS®, he expects there are probably 150,00-200,000 counselors in the real estate business.” Roughly 20% of the total.

So the thing is, I agree 100% with Steve Murray when he says technology will never replace a REALTOR, if what he really means is “Counselor”. If he means Facilitator, then sorry, I don’t care if they have the golden R tattooed on their foreheads; they can be replaced by technology, and frankly, should be.

A real estate transaction is complex, yes, but it’s also mechanical. It’s paperwork. Technology absolutely excels at repetitive mechanical tasks; it completely destroys paperwork whenever and wherever it has been implemented. There is absolutely zero reason to hire an agent to fill out an offer form; technology can easily allow the buyer to do that directly. There is no reason to hire an agent to take some photographs and load them into the MLS, then wait for the phone to ring. It’s cheaper to hire a photographer, pay somebody $200 to put the listing into the MLS, and wait for the phone to ring. Under contract? There is no reason to hire a REALTOR to babysit a stack of papers, most of which are handled by the escrow and title companies in any event, and even when a REALTOR does “handle” it, that work is often outsourced to some transaction coordinator in the Philippines making $8/hour.

Truth is, the real estate transaction is paperwork… except when problems occur and negotiation becomes key and the client needs to be reassured and, and, and. In those moments, where the deal might be hanging by a thread, or some unforeseen development is creating havoc and chaos, and the client is stuck wondering if they could move next week as they had planned… then, then technology is useless. Algorithms are no help. Computers cannot empathize, calm you down, and tell you what needs to happen. Software isn’t going to work overtime to figure something out for you. Only a human being can do that.

But as Murray said, the Facilitators suck at all of those things; they do not bring much value in the way of true guidance. They don’t have the skills or the knowledge in the “details of either the market of the transaction.” That they can process a sales transaction is good, but that is exactly the sort of mechanical thing that technology can and should replace.

If Technology Cannot, Then Somebody Has To

The truth is that conflating the Counselor and the Facilitator under the umbrella term REALTOR does a disservice to both the Counselors who are bringing tremendous value into a stress-filled situation, and to the REALTOR brand. (No wonder consumers — and professionals! — think the REALTOR brand is utterly meaningless.)

And if Steve Murray’s own estimates are correct, only about 20% of the REALTOR population is a Counselor. The industry and Associations can hold out shining examples of the Counselor REALTOR in their paeans to how machines can’t replace professionals, and in their marketing and advertising pieces… but consumers are not stupid. They may be misled, but they’re not idiots. The 20% does not uplift the 80% who suck; rather, the 80% who suck drag down the 20% who do not. The bait-and-switch of REALTOR marketing is not working, y’all. “Look at this shiny Counselor! Oh, you want to buy? Roll this here dice; four out of five times, you’ll get yourself a smiling Facilitator to help facilitate the sale of your single most important asset!”

Hence, the DANGER Report.

So if technology cannot replace the Facilitator, well, then somebody has to.

Lost in the midst of all the Zillow-hating, the Upstream-fearing, the Self-promoting, the Internal-politicking, and the Conference-attending is the simple fact that the single greatest threat to the industry, the single biggest challenge that we all face, is that somebody has to replace the Facilitator.

.GOV ain’t gonna do it, because they make license fees from millions upon millions of people taking exams and getting their license. Plus, somebody with a real estate license rarely files for unemployment, which keeps the unemployment rate low.

Brokerages ain’t gonna do it, because they’re in the business of making money, and if having 5,000 Facilitators paying a $100/mo desk fee makes them more money than having 500 Counselors on a 90/10 split, well, by golly, they’ll drag a wide net through an ocean of Facilitators.

I have long hoped that the Association of REALTORS would do it, because the whole ethos of the Association, the whole basis of the Code of Ethics, is that they want to be Counselors and smite down upon the Facilitators with great vengeance and furious anger. A part of me still thinks that could happen, but… to quote Logen Ninefingers, one has to be realistic about these things.

A lot of brokers, REALTORS, and industry insiders are deathly afraid that some tech company, some super-nerd genius out of Big Bang Theory, some amazing breakthrough is going to “disintermediate” the REALTOR. A whole lot of folks in the industry hate on Zillow (and hated on Realtor.com before Zillow) because they think Zillow wants to replace the REALTOR. So we get articles on why technology can never replace a REALTOR, why the sky-high valuations of various real estate tech companies are ridonkulous, and everybody claps each other on the back laughing… yet strangely… without being fully relaxed.

You know why? Because nothing from Wall Street or Silicon Valley can replace the Counselor, the true expert, the real REALTOR, who gives a crap. But technology, even the simplest technology (like online property search) can and does replace the Facilitator.

If it could not, then somebody has to. Are you that somebody? Do you want to be? Because I might.

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

51 Comments

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Truth is, the real estate transaction is paperwork… except when problems occur and negotiation becomes key and the client needs to be reassured and, and, and. In those moments, where the deal might be hanging by a thread, or some unforeseen development is creating havoc and chaos, and the client is stuck wondering if they could move next week as they had planned… then, then technology is useless. Algorithms are no help. Computers cannot empathize, calm you down, and tell you what needs to happen. Software isn’t going to work overtime to figure something out for you. Only a human being can do that.

The problem in real estate is you are never sure when a deal will blow up and the hand holding begins. Often those who think they are fine are the ones likely to have the most problems.

Until Brokers stand up and accept responsibility and are truly held accountable (financially and legally) for the “facilitators” they bring on board, change is impossible. We, as an industry, allow Brokers to make their money off of “agents” yet have limited requirements of what they should do to earn that money. I have spent my career with a large traditional broker who I have paid thousands and thousands of dollars each year in commission splits. Why? Because I know am a better Realtor because of their training, management, market share, etc. I also recognize that I get what I pay for. This protecting me and the consumers I work with.

Yet, I compete daily for business with agents who pay pennies basically to freedom shop Brokers to also work in my industry. Why? Because they do not see value in the training, management, market share, etc… And most importantly, because they can. Can you imagine if other industries like law or medicine allowed this wild, Wild West approach to licensing and regulation?

I spend a huge portion of my marketing dollars each year just trying to help the consumer differentiate between the two. I really do not want to work with a consumer who feels they merely need a facilitator. They are the first to beg for part of my hard earned commission. I do however want to work with the consumer who wants a counselor. How can that consumer discern the difference?

Perhaps we need revisit the Realtor moniker and how it applies to the practitioner. If it applies to one and all, and the only barrier to entry is membership in NAR, I feel it has lost whatever cache it once had. Unless we want to further define it as Realtor Facilitator and Realtor Counselor. Much like nursing with its graded designations. Now, we might be getting somewhere.

I may be working on an answer, Christi 🙂 But yeah, I think it’s well past time for Association soul-searching. I just… think I need to be realistic about such things, given my experience over the past six years.

I think the answer lies in between the two. Brokers will bring on facilitators. with marginal supervision as Christi says. Being a Realtor used to be a differentiation point. It no longer is because…. it’s not voluntary. It walks the grey line, because technically it is, but my local association, my state and most others, require you to join. You have to be a Realtor member to gain mls access. if your Broker is a member, all agents are required to be a member or the broker is billed for them anyway. So the industry requires anyone with a license who works in the business to join, then wrings its hands and complains constantly about the need to raise the bar and get marginal agents to stop being “bad agents”. Why not make the membership voluntary again? truly voluntary? because of loss of revenue. Because associations want to protect their own interests first, their own jobs and existence. Until the day that dynamic changes, nothing will

Currently, there are only 1-3 times per transaction that a Counselor’s expertise is really needed to close a sale, and sometimes not at all. But we hang around on duty, just in case, while transaction coordinators handle the paperwork.

Every disrupting tech company comes into the real estate space with their fancy website and discounted fees and thinks that’s enough to blow up realtors.

One of these companies will eventually figure out that the Counselor is the key to closing deals. They will spend big money to hire a team of Counselors to work the phones. Whenever a buyer, seller, or facilitator senses a problem, they call the Counselor Desk to get a fix.

Rarely does a Counselor need to be on site – if there is a physical problem, just send me a photo. The bulk of the Counselor work is proposing solutions and mending egos. It is a universal skill set that can be applied coast-to-coast.

What about valuations? Don’t you have to be a local expert to determine the value of a home? Not any more – there are enough internet tools that buyers and sellers are in the same ballpark price-wise, and just want/need to squabble about the last 5%. A great Counselor can look at comps anywhere in America and offer an opinion to help bridge the gap.

We are in the ‘close-enough’ business. The public doesn’t expert perfection, they just want a helping hand. Adding Counselors to a slick order-processing operation would clinch it.

Redfin could pull it off, if their lead sales people last long enough to get up to the Counselor level. They will stand a better chance 5-10 years from now when most of the Facilitators-disguised-as-Counselors have retired.

It was different back in the 1980s when this was a relationship business, and the realtor did everything – the consumer relied on one person. But now we have dug our own grave by out-sourcing most functions in the name of volume and efficiency. The only role left is that of Counselor, and that too will get better packaged and sold.

It may happen as you say, Jim. I kinda doubt it, though, because of what we see in other professions.

Legal work is an example; for 90% of legal work, document review, paper shuffling, drafting standard contracts, etc., you don’t need a Counselor (equivalent in law). You can outsource that crap to some legal outsourcing company out of Bangalore. But that 10% of the time when the $#!7 hits the fan, you want someone who knows what he’s doing. If the thing is important enough, consumers will pay for the Counselor.

The problem with RE is that the industry does not distinguish between a Counselor and a Facilitator. They cost the same, they’re represented as if they’re the same, there are no metrics available to consumers to distinguish, and everybody wants to lie to consumers are pretend that REALTORS are all the same. Sorry, but you rarely see that in other professions. Board-Certified means something in medicine, because it’s a real pain in the ass to get and those doctors DO know something more than just some GP. CPA means something in accounting. Lawyers don’t do as good a job, but at least there are price signals ($1,000 an hour vs. $250 flat fee for a divorce! attorney) available.

I’d like the industry to stop pretending and stop misleading the consumer to protect their own little corner of turf, because this issue is killing the goose that lays the golden eggs. But if the industry will not, well, like I said, somebody has to do it.

I totally agree about the realtor industry willfully misleading the consumers. How embarrassing was it when realtors beat down attempts to publish the sales histories of agents?

It won’t change until an outside company comes in to blow it up.

The reality doesn’t mater either. It is what you can sell.

An outside tech company that spends $100 million in advertising per year talking on their “Panel of Experts available by phone to solve any problem” may not be the same as a Counselor, but to the consumer it will sound close enough.

“The problem with RE is that the industry does not distinguish between a Counselor and a Facilitator. They cost the same, they’re represented as if they’re the same, there are no metrics available to consumers to distinguish, and everybody wants to lie to consumers are pretend that REALTORS are all the same.”

I beat this to death in your last few posts on the subject but I’d like to offer it up one more time.

The real estate industry i.e. brokerages, as they are the driver of the business, can very easily solve the problem of too many facilitators…just fire the low producing 80% and keep the top 20%. The top 20% of the brokerage are more likely to be counselors anyway….problem solved.

The downside to this solution is the industry is left with Goldman Sachs i.e. Coldwell Banker; but we all know that there is room for an Edward D. Jones and Charles Schwab.

Great post, Rob. Amid all the constant moaning about “raising the bar,” (such a cliche it’s a drinking game: everybody take a shot) what is really needed is “closing the gate.” But there is an entire industry focused on not doing that. On selling stuff to more and more real estate agents instead. And not just the broker income, the lead gen systems, the “Premier Agent” advertising, the seminars and conventions, but government fees, membership dues in NAR, state and local boards.
I teach a class on Professional Standards in Austin, where I vaguely and very carefully suggest that the individual agents, the grass-roots level where change is going to have to be initiated, might want to think twice before fighting against higher dues and education requirements, but I am endangering my own livelihood since I depend on boards to hire me to teach classes to the masses. If the masses go away, so does my pay.
I’ve long said that the only way the bar is going to be raised (drink another shot) is to require a degree, but that is not going to happen legislatively–way too much power and money opposed to it. Until that happens, real estate is going to continue to be the cheapest business you can start, and attract opportunists, dilettantes and hobbyists because of it.
I hope you are that somebody who can bring about change, and I might be able to help you someday, but it would have to be the year before I retire because any significant noise-making would be career-ending. What a conundrum.

Bingo, you said it. The trade associations want membership to grow, even though 10% do 90% $$, etc – another drinking game.

I just had a seller call to tell me “we’ve picked someone else because he’s willing to save me $$’s on his side of the commission.” Save unknown dollars from an unknown price…does it matter what he doesn’t bring to the table? Nope. Because we have been shoved into the same box…nobody is different, and the customer knows more.

Reba I respectfully disagree with some of your comments. I have been licensed and working the Real Estate business since 1970. I have been a salesman, sales/office manager, broker owner, instructor and real estate school owner/director. I do not have a degree but have may people with degrees sit in my classroom and work for me, some of whom felt that their degree was a pass to everything rather than a basis for their career. Many of them feel that additional education in real estate is a waste of their time because they already have a degree. They tend to fly by the seat of their pants and get by as facilitators but only a few ever really become counselors. The regulators and the Association of Realtors need to require additional education and demonstration of their knowledge and understanding of the technical, legal, and psychological components of all aspects of a real estate transaction. Brokerages also need to require more of their agents but unfortunately the IC status interferes with that and maybe that needs to be replaced with the employer-employee relationship. I also feel that when in front of the classroom I must express my beliefs even if not popular and encourage discussion to the contrary that way both the student and myself learn.

Rob, you’re the best (IMO) nobody puts the pen to paper as good as you do it, and your music videos are epic!

You know what they say about myths, don’t you? Anyway, it seems you have been fixated about residential REALTORS lately. Before I was a broker/REALTOR- I purchased two homes that required the service of a REALTOR as well as I was a spec builder (building 14 homes) which also required the service of a REALTOR. My experience with the service of the REALTORS I used varied. But isn’t that normal? Yes, I encounter a bad REALTOR, but I also encountered several amazing REALTORS.

I don’t care what you do or where you go “service providers” vary. Just like anything else, there are going to be great ones and everything else inbetween.

The one thing in your post that really strikes a cord with me is the whole “ZILLOW” thing. I can’t speak for others, but I can tell you that I can’t stand ZILLOW. But it is not for ANY of the reasons you mention. I hate ZILLOW because I feel there listing information is inaccurate. I hate ZILLOW because they are a media company that pretends to be a leader in RE and they deceive the public. I hate ZILLOW because I believe they sell junk leads to RE agents. I hate ZILLOW because they treated me like crap when I was a premiere agent. Look no further than all of the lawsuits filed against ZILLOW are more reasons I hate ZILLOW. And of course, I hate ZILLOW because of the years and years of inaccurate home values they publish.

If the FAA allowed the airlines to operate with professional standards similar to those of the NAR, any pilot who successfully completed ground school would be instantly qualified to fly a Boeing 777. So how many passengers would board that airplane?

And therein lies Rob’s conundrum. Who is going to explain facilitators vs. counselors? Nobody is financially motivated, so the consumers are ignorant and motivated by their own financial considerations – Realtors are all the same so let’s go with the cheapest.

I completely agree, I’ve been in the industry a long time and I’ve seen the big brokerages go from being “in the business” with the agents to being an entity that offers services for a fee, we are basically their clients. When I first started, the brokerage earned their profits from their side of the comission, nothing else was involved. Now there are desk fees, online fees, transaction coordination fees, E and O fees, fees for advertising, (That was paid for when I first started), the list goes on. I paid a huge amount in franchise fees this year and don’t really know what I got for that, I don’t think a single client of mine gave a flip what franchise I work for, that was not why they called me.

I completely agree that the industry needs to flush out the 80% that are just doing a few deals a year, they are giving us a bad name and lowering our professional appearance to that of used car salespeople or worse (not saying anything bad about used car salespeole, I’m sure they are very nice but they suffer a bad reputation, deserved or not). Part timers also get in my craw, would you go do a part-time doctor or attorney? I know that there was a recent uproar about someone advertising about part timers but until we take ourselves seriously, the general public will not either.

I don’t think that any “big box” brokerage is going to make any changes, they have too much invested in getting all these garbage fees that come along with having tons of agents on their roster, with little regard for their production. We have agents on our roster that I’ve never met, don’t know who they are and some haven’t done a deal all year but I’m sure they are paying their monthly fees, and that’s important to the brokerage.

I feel like the change is easier to make at the small brokerage level, with owners/brokers that care about things like standards, production, agents coming on to work, just having professional counselors and no facilitators on their roster. I also think that a small office of counselors can be just as profitable or more profitable than an office with 10% counselors and 90% facilitators but I don’t have any proof on this yet. If any of you have a small brokerage that works this way, please let me know, I’d like to talk to you about your experience with this.

Great article! As a real estate licensee since 1977 and broker since 1980 I have seen my chosen profession devolve in a way that is tragic.

Is there a way to brand yourself as a real estate counselor? As a professional with the ethics, knowledge, expertise and experience necessary to represent a client in a manner we all should aspire to?

I have…along with my 4 co-founders of BrokerInTrust…..a network of only Brokers, no salespeople. If you watch our series of videos at http://www.BrokerInTrust.com we describe today’s real estate industry, its’ evolution over the last 30+ years from being Client centric to becoming agent centric……and our efforts to educate/encourage customers to demand and expect quality representation in their real estate dealings. Take a look…. True real estate professionals….you are not alone in the world, we are out there.

Thanks Rob. Whether you call them a “Counselor or Facilitator” many Sellers are finding ways to remove a listing agent from the transaction. We are still a distance away from the “Irreplaceable Realtor”, however there are plenty of companies who are trying to change the model of how 90% of residential real estate is transacted, (10% being sold by owner). Sellers are finding a lot of success in versions of reduced involvement of a listing agent (Counselor or Facilitator) every day. They are educating themselves with the tools available for them to price and market their home and how to expose it through the MLS without paying a full 6% fee. The past perception of a FSBO is gone. So many Sellers still consider themselves FSBO’s yet their homes are in an MLS and they are willing to work with a Buyer’s agent. I find it difficult to believe that NAR is able to really determine percentages as to which Seller is a FSBO and which is a Realtor sale. If an agent is representing only one side of the transaction, which column does the sale fall within?

Many “for sale by owner” type companies offer economical solutions for Sellers to get into the MLS. For us, Sellers list their home on ByOwner.com through a simple web interface (technology). Showings are coordinated through a third party showing service, where appointments are often set over email or text (technology). Offers are negotiated directly between the Seller, the Buyer’s agent or the Buyer directly, and the owner or Buyer’s agent are coordinating the closing with a local closing agent. There are issues which can and do arise in the middle of a transaction where the Seller may need some hand holding or professional help, but in order to save thousands in commissions, many are willing to navigate the listing process without a “Counselor or Facilitator”.

I guess it depends on your definition of win Drew. There are some agents I know here who do give a shit about their business and what they are doing in life. BUT their definition of helping others is completely different than mine. I try to never treat others in a way I wouldnt want to be treated (and as a human sometimes feel). But these people who give a shit about their business and what they are doing in life are doing things I think are disrespectful and just plain not how you treat people. But they give a shit what they do. They are winning when it comes to how big their business may be, but that doesnt mean they are winning in my book

Even my plumber has an apprentice. And the apprentice does nothing without the careful and watchful eye of the licensed plumber. It is insane that we encourage people to get licensed, tell them to join the local, State and NAR things with no experience and then allow the same people to join the MLS whereby they are instantly (and for free) provided with thousands of listings to sell that they know nothing about. Wondering why consumers rank the industry is ranked just above used car dealers? Really? Is that still a mystery? And worst yet, that ranking “fits all” until we demand that it does not and that there is a meaningful difference between the “plumber and the apprentice”.

As you work through your idea, whatever it may be, please keep this little story in mind. It addresses some of the issues that are brought up in the “raise the bar”, marginal agents, facilitator/counselor discussions:

In my past career I was part of a hiring team that interviewed prospective individuals that were interested in a job within the Investment Bank where I was working in Chicago.

Headquarters in New York had sent out a mandate that only those with an MBA were to be considered for hire. I saw and interviewed individuals with off the charts educations; London School of Economics, MIT, Harvard…the whole bit. My manager hired a few.

One day I walked through our office’s library to find one of the new hires reading. I asked him what he was doing…he said “research”. I told him we have a research department in NY, your job is to get out there, pick up the phone, call someone you don’t know and sell them something…that’s the job..you’re a salesman.

None of the highly educated hires survived.

Those of us that are agents or brokers know that residential real estate is a sales job and most often one which compensates it sales via commission. We also know that the product we’re selling is not highly sophisticated. No intricate software engineering, no complex derivatives, a very simple product actually…..one as you have discussed can be well presented simply through photos.

So, IMO “raising the bar” and tackling facilitators/counselors and marginal agents is not an education/people problem, it’s a brokerage business model problem…..one in which the Internet is helping to solve right now. 🙂

Hi Brian – thanks for this. Because you’re 100% correct in a very important way: we need to do a better job of defining what “quality” means.

I know how I would define it, but that might not be how many brokers/agents would define it. I touched on this in the post itself, and Drew Meyers picked up on it, but let’s lay it out specifically. To me, a Counselor first and foremost gives a shit — first, she cares about her client, and second, she cares about herself, in that order.

This real estate thing… yes, it can be complex, but let’s not pretend it’s rocket science or investment banking. Pricing a home can be complex, but it’s not pricing a derivative; negotiating a deal can be tricky, but it’s not negotiating a labor agreement. Brains are always important in any profession, but real estate isn’t a “high-powered brain” profession to begin with. So what I believe is that a person of average intelligence, who cares about the job she is doing, who cares about the client as a person and not just as a wallet-with-legs, would pick up the necessary skills and expertise, and outsource the rest (e.g., photography), and do a great job and add value to the transaction. And because she cares about herself, the Counselor would never stop learning. In the parlance of NFL players, she would never stop trying to improve each and every day.

Look, Sue Adler is probably the best REALTOR I know personally, because she’s listed and sold my NJ home, and because we’ve spent hours talking about real estate dating back to the Lucky Strikes Social Media Club days. The woman is a top producer with a team doing insane volume, a second-generation REALTOR who’s been in the business since she was 21. She’s a little bossy with her clients, but it comes from *caring* rather than from trying to make a painless buck. The attitude of, “Look, let me do my job for you, because I DO know what is best for you” is the attitude of the Counselor, and she got it over decades of experience.

The thing about Sue that I think is the most remarkable is that even after decades (not gonna give away her actual age here, lol) of experience, even after award after award, speaking on stage before thousands of people, she’s still always trying to get better every day. I know this. She’s still trying to figure out how to improve some tiny little aspect of her marketing, of her operations, of how to do a listing presentation, of how to stage a home, etc. etc. I know she’s constantly talking to other top pros to see if they’re doing something that’s really good that she hasn’t thought of. Sue herself will tell you that she’s not a rocket scientist. If you want her to crunch a huge database of numbers to predict economic trends, she’ll just tell you to hire an economist (which she does).

It’s not the brain that matters for real estate, Brian — it’s heart. Counselors have it; Facilitators do not. Most of the crappy work that Facilitators do isn’t from not knowing what to do; it’s from not giving a shit about what to do, from not giving a shit about the client.

You say it’s a business model problem, and that the salesperson will end up winning at the end of the day. I don’t think so. Because while sales IS important to real estate, like it is in any profession (including law, medicine, and clergy), because of the personal, emotional, and financial importance of the transaction, what ultimately matters to the client is that they feel and are *taken care of*.

Consulting is not that different. I’m a pretty smart guy, yeah, but what I take pride in isn’t how brilliant I am, or how creative my solutions are (though I am, and they are, heh). I take pride in the fact that if I take on a client, I really give a shit about that client. I routinely turn down work because of conflict of interest, or because I think someone else could do a better job of what the client needs. I’m far from the best salesman in the consulting world, but y’know, I’m really OK with that. Because my clients get my very best effort, all of which goes to trying to do what is in their best interests, not in mine. Ultimately, I think that comes through.

Is it too much to ask that REALTORS, with their Code of Ethics, do the same? Not asking for brains here, but for heart. CARE! Give a shit! No, it is not. Sorry, but that’s what makes this a profession and not a gig.

I hope, like me, you are looking at our conversation as both a learning experience for both, as well as having some fun 🙂

Here’s where it looks like we agree to disagree:

“……because of the personal, emotional, and financial importance of the transaction, what ultimately matters to the client is that they feel and are *taken care of*.”

Firstly, I have never had the experience of doing business with someone that “didn’t give a s&%t”, the other side of my trades, regardless of profession, have always been with someone that has financial skin in the game…so, they care….big time.

Secondly, you’re a guy who follows the patterns and projects about the behavior of the millennials. Given that, I think you will find, and I have experienced with my own millennials…they don’t give a s#%t about having a relationship with anyone, much less a real estate agent. So, I will take the other side of “client’s want to be taken care of”…at least as the world moves forward. Millennials want to do everything they can on their phone or laptop….they don’t like people in their s#@t….they’re online until they are forced to get off….i.e. take a look inside the house.

“They care” about their business is taken for granted; everybody cares about the money in their own bank account. Skin in the game, etc. and whatever. The used car salesman who’s trying to get you into the 2009 BMW cares a great deal about closing the sale.

But you know your counterpart in a trade doesn’t give a shit about YOU. Why would he? He’s not your fiduciary. The used car salesman doesn’t give a crap about YOU. Why would he?

In THEORY, your lawyer gives a crap about you; your doctor cares about not just your insurance, but you as a patient. In theory, your realtor should care about YOU, not just the deal.

Hence, Counselor vs. Facilitator.

And I disagree with your assessment of Millennials. I think they care even more about relationships and being taken care of (maybe because so many of them have been coddled by mommy and daddy?) than the older folks. They don’t care about yapping on the phone or making small talk and do like to do things themselves and don’t like people in their shit, etc. but my sense is that Millennials are far more tribal, relationship-driven, and group-oriented than previous generations. Maybe it’s because they’ve been disappointed so much and lied to so much and fooled so much by their elders and their so-called leaders that they value real relationships even more when they find it?

Recently received this note from Maureen Dunn, President, McEnearney Associates Realtors, Inc. – thought I would share it with you.

“I am in the process of reviewing and updating our company policy manual and this is something I have had in it for years, at the beginning of the manual. You wrote this for the NVAR (Northern Virginia Association of Realtors®) newsletter back in 2007 ???? thought you would enjoy it.” Maureeen

It’s not easy to be better… And saying so doesn’t make it so.

By Larry D. Romito
What is better anyway?
For world-class athletes it’s faster, higher, and stronger.
Service has become a world class event. Two-thirds of the global economy has migrated from a manufacturing base to service. That makes service serious business, in essence a world-class event.
Athletes competing at the highest levels train vigorously. They meticulously track performance, exercise great discipline, utilize technology and employ specialized resources to improve performance.

Is there something to be learned from this?
There certainly is. In business the consumer is the Olympic committee. Consumers define the events and judge the results.
In the service sector and especially in real estate services, it’s more common for the service provider or each organization to define the event, decide what to measure and to develop its own measurement standards.

Today consumers make the rules
But the service provider doesn’t make the rules in today’s economy, the consumer does. World-class competitors in business today are totally focused on consumer-defined events.
As competition intensifies for athletes or in commerce, some other changes emerge: teamwork, specialization, technology, systems and processes, better fitness, performance feedback, improvement measurement and all leading to even tougher competition.
So what is faster, higher, and stronger in real estate service and who really excels? The measurement standards in real estate services have always been production based – how much … without the balance of how good or how well. The belief is that doing a lot is doing well.

Measuring success
Do these traditional standards and metrics of production performance fit as well today?
Real estate service is more like other businesses with passing each week. The consumer is in charge. Control comes from responding to the changing needs and interests of consumers by delivering a better, more valuable and satisfying total service experience.

Winning = better service
In the professional services arena, that means offering consistency, reliability, accountability, responsiveness and fixing things when they go wrong.
Real Estate sales professionals are like competitive athletes. They play to win, enjoy winning and love recognition. But the rules need to change. If winning is selling more without truly serving better, that’s losing. Serving better means delivering more value, greater service satisfaction and a better service experience.

When the stars align – consumer interest, provider recognition
A focus on quality – it’s time. The agent/independent contractor as an entrepreneur understands the relationship between the need for change and survival. For a focus on service quality to be meaningful and effective it must both meet the needs of the consumer and offer benefit to the professional. Awards, recognition and rewards for professional excellence must go beyond the single dimension of production metrics. Production standards should be balanced with service quality standards so that everyone’s interests are aligned and everyone benefits.

My real estate partner of over twenty years, worked at Sears near the end of WWII. He joined the army but was worried that the Sears he worked at in El Paso, would not be able to get along without him…it did 🙂

Everyone is replaceable, at least to a degree, especially those having difficulty defining their value proposition.

Would it be ridiculous for me to suggest that perhaps technology has a role in facilitating the Facilitators at the expense of the Counselors?

I am not a “Zillow Hater”. The idea that a consumer can go on line, view properties and neighborhood information is valuable. Makes the Real Estate professional’s job a lot easier! But these same consumers then can “Find an Agent” by clicking on an ad that any agent can buy for access to these consumers. These agents may have no connection whatsoever to the home, the neighborhood or the community. Its a numbers game for them. Its not about providing service, its about converting and referring. They build teams, hire scrubbers, and make referrals to a more local agent who give them a decent referral fee – not basing that referral on the quality of service a Real Estate professional may or may not provide.

We know the Counselor Real Estate professionals will do well because they are generally referred by people who know them and have worked with them. While the business model that Facilitators can easily exploit continues and thrives, the consumers selecting these people have to take some responsibility for accepting that level of service. I don’t think those technology companies want us to thin our herd – they make too much money off of the opportunities they present. 20% of what would be considered the best of us aren’t going to spend the dollars to get clicked on. We don’t have to.

It seems the time of year to once again categorize and then deride the low to non-producers populating the industry. Is it any wonder we have so many “facilitators” in an industry with low barriers to entry that provides no security regarding income or minimal employee benefits? Too, from where did the “Consultants” originate? Everyone begins somewhere. Did these Consultants not begin and thence rise from the ranks of the Facilitators? Also, I know many phenomenally successful Consultants who possess the same mediocre traits and practice their business much the same way as that of the Facilitators. Some are ego driven, arrogant, and self serving. That being said, their overriding strength and superiority lies in the fact that they are good “connectors”. They are good at building relationships, gaining trust and able to leverage this talent in growing their business one client at a time to incremental success. Let’s not throw the proverbial “baby” out with the bath water. Let’s select, coach and celebrate those in the business that can, and give the rest a chance.

Wow interesting conversation … From the other side of the world here is my 2 cents worth … The real estate industry and all the problems you discuss are all created (IMHO) by one core thing. The “commission only business model and sales culture” that the entire industry is built upon. You talk about facilitator vs councilor … In my language that is “salesperson vs consultant ( lawyer, Doctor, accountant or any professional with specialist knowledge. Bottom line “commission sales” = self interest … Consulting = client interest. consultants don’t charge clients a commission. (If they do then they are not a consultant – they are a self interested salesperson calling themselves a consultant). A consultants job is to advise and serve in their clients best interests – not talk the client into something that enables them to get a Commission. only rarely will a true consultant work for clients on a contingency based fee – because it creates a conflict of interest – they charge for their expertise, knowledge, advice, time and outgoings – they charge fees not commissions… Now for a moment consider the massive positive ramifications if real estate agents made the shift in thinking to a consultancy based model and culture – it will change everything – from how the industry recruits and trains – to how they operate on a daily basis – to how the francisies etc are structured – to how clients pay – to how clients perceive the industry … And I believe that bottom line it goes a long way to fixing the two big issues ( low trust by consumers & inefficiently high fees) So we are doing it – we’ve made the leap and the results are proving to be phenomenal for both us and our clients.

I don’t disagree. Thanks for checking in from NZ 🙂 I’ve written before about the whole commission vs. hourly rate thing on this blog, and yes, if you or others can prove that business model to be superior, I’m sure things will change.

In the meantime, though, one has to be realistic about these things. Damn, I’m quoting Logen far too much these days.

Thanks for your reply Rob. Can you point me in the direction of that post regarding “commission vs hourly rate” – I’d be interested to read your musings.

We’ve already proven it to be 🙂 although I suppose that comes down to ones definition of “superior”?

If you mean superior in the way of being more EFFICIENT for consumers? Tick

Clients only pay for the work done on their behalf – instead of subsidising the industry for all the time, effort and resources it spends on:
(a) prospecting, profile marketing, sales training etc etc (none of which is working for the client nor ads value to them) and,
(b) working for other clients who pay nothing. (This is simply a reality of contingent commissions. The industry spends a massive amount of resources working for clients who then choose not to sell, therefore paying nothing. High commissions from the genuine sellers are needed to subsidise those losses. So effectively the clients who sell are subsidising the work done for the clients who choose not to).

If you mean superior in the way of being more EFFICIENT for Agents? Tick

Agents spend more time actually working for clients instead of “looking” for them.
Agents are compensated fairly for the work they do for all clients – therefore have consistent cash flow and do not need to charge the ‘easy sellers’ an excessive commission (that is totally unrelated to the actual work involved) in order to recoup losses from clients who don’t pay.

This enables them to be more productive & service more clients than traditional agents, which in turn reduces the numbers of agents needed. We all know there are far too many. Excessive commissions are the reason so many can exist in the first place. It’s also why the “brokerages / franchises etc” continue to recruit (for them it’s a numbers game). Which in turn fuels the sales trainers & coaches – teaching ego based (look at me) “Profile” marketing, “closing” techniques (wake up! it’s no longer 1965), hounding people (prospecting), sleazy bait & switch schemes, how to talk sellers into selling – so they can earn a commission… the list goes on and on … and, here is the thing – all of it’s about ‘self interest’. It’s about whats best for the different players within the industry*…. And we wonder why consumers don’t trust us? How about we stop acting like self interested salespeople.

(*In my opinion this is NOT what’s best for the industry at all – it’s destroying the industry. The longer it continues the deeper the industry is digging it’s own grave. If we don’t elevate ourselves quickly to a true profession (one that is client focussed & ads genuine value), then it’s just a matter of time until we are extinct. Somebody will disrupt Real Estate eventually. Why? Because so many are trying to disrupt it. Why? Because consumers want it to happen (they wish for a better way)… Otherwise no one would even bother trying to disrupt in the first place.

If you mean superior in the way of raising consumer TRUST in the industry? Tick

Because it removes the basic conflict of interest (between what is best for the client vs agent) that is created by contingent ‘commission only’. (Sure our industry can harp on all they like about how it puts the clients interests first, but we all know this is just rhetoric & consumers see straight through it). For those agents reading this – taking offence – thinking “I DO ADVISE IN MY CLIENTS BEST INTERESTS” … Yes I know there are many of you out there that are genuine about trying to do that – but think about it. How often have you been punished by giving your client the right advice? How often have you advised the truth about what their property is likely to sell for – only to have another agent “tell em what they want to hear”… and then watched them go through a horrible conditioning process (by that other agent) to eventually end up selling where you advised in the first place? How often have you then feared telling the next seller the truth? How often have you wanted to advise your client to turn down an offer, or take their property off the market – but by doing so would mean you loose, you don’t get a commission, you can’t provide for your family? … And here is another thing – even IF YOU DO have an extremely high level of character – one that triumphs over your basic need for survival, that overcomes your fear of losing a commission, your fear of not providing for your children… and you CAN truly be your clients advocate … even then … your clients don’t believe you. They still mistrust your advice. They think you are only advising them to reduce their asking price because you want an easy ‘commission’… you would naturally question your doctors motives, if they derived all their income in the form of ‘commissions’ from the drug companies… So how can you expect clients to trust you (even if you are genuine), when you look, act, talk, and charge like a self interested commission salesperson?
Because clients realise they are engaging a consultant (paying for advice and services… It requires a higher level of confidence and trust in the agent by the client. We are finding that, from the outset, the relationship with our client is on a much higher level. It’s Client – Trusted Advisor instead of Client – Untrusted Salesperson

If you mean superior in the way of EMPOWERING consumers? Tick

It encourages clients to take more responsibility for selling their property. Ultimately their decisions and actions affect their result. A client who works hard to present their property well, that is genuine about selling, prices their property realistically and is willing to accept the most the market is currently prepared to offer… will sell relatively easily (with less work, effort or outgoing expenses needed by the agent) – yet with traditional commissions, they gain no benefit from their actions and good decisions (sure they will achieve a better sale price than the poorly presented, over priced sellers down the road – but they still have to pay the same fee). Commission removes their ability to reduce their selling costs. In contrast, consultancy based ‘fee for service’ – means the quicker and easier their property sells, the less work and outgoings needed by the agent, the less fees they pay – thus substantially increasing their PROFIT (by having the double whammy of maximising their sale price and minimising their costs). This realisation, that they (the client) can affect their own profit, is a powerful force.

Because clients are paying for services (like they would with any other professional advisor) it also has several other positive effects.

they select their agent in a totally different way. It’s not about the one who tells them what they want to hear, it’s not about the biggest profile, it’s not about the one they ‘like’ the most (because they are all the same so may as well give it to our friend)… No No No – They choose the best. The best at maximising their profits. The one they can trust, that they know is truly on their side. The one they respect. They are looking for an advisor with superior knowledge, experience and expertise. One that will tell them what they need to know – so they can make smart decisions.

It also makes the client question if they really want to sell in the first place. When they know they will be paying for service regardless of the result – they do not put their property on the market on a whim. The old… “you’ve got nothing to lose – if it doesn’t sell it will cost you nothing” ploy – used by agents to entice more people into listing their property – no longer holds water. The sellers that engage a professional consultant are genuine.

If you mean superior in the way of EMPOWERING agents to raise STANDARDS & PROFESSIONALISM in the industry? Tick

It means agents need to focus on improving their knowledge & skills in the areas that really matter to the client…

They focus on what actually ads value to their clients price (it’s certainly not ego based profile advertising, prospecting, letter box drops, etc).
They learn how the principles of ‘Value’ work (here in NZ ‘Valuation’ is a 3 year university degree).
Presentation (staging) … what increases saleability and price and what doesn’t? (there is no real research or training on this within our industry).
They study Smart Marketing – how to attract buyers for their clients property in the most cost effective way (Anybody who thinks the average real estate agent is a skilled marketer – is kidding themselves).
They learn about Ethics and how to remove ‘conflicts of interest’.
They study the principles of Advocacy and Consulting – how to help clients make good decisions. How to Question, Diagnose and only then Prescribe – like doctors. (In the professional consulting world, “selling” – talking clients into your pre determined desired outcome, so you can win a commission – without focussing on what is best for the client, without following the Question/Diagnose/Prescribe process – is considered ‘Malpractice’.
They study the principles of Negotiation. How to truly negotiate on behalf of their clients – securing the clients desired outcomes… the best price, terms and conditions possible – rather than negotiating to obtain themselves a commission ( this BTW is where many sellers loose thousands of dollars without knowing it. The traditional industry style of negotiating often helps the buyer get the property for much less than they were prepared to pay – most agents are totally inept at negotiating and therefore in my view negligent in their responsibility to their clients… but hey, that topic alone probably deserves a book… or two). The industry tells consumers that they are good negotiators – bullshit – most agents have never had any real negotiation training – and what they think is negotiation training isn’t – it’s sales training.
They focus on researching and studying all the selling methods / approaches to the market. Identifying which actually work in the clients interests. Discarding those that are designed to benefit the industry only. They learn how those different approaches work in different situations and which ones are suited to different clients, markets and circumstances. Instead of the ‘one size fits all approach’ the traditional industry forces down consumers throats – consultants develop different strategies, services and fee structures that are better suited to each different client and their personal situation – only then can they (the agent) truly prescribe a tailored solution for each client – only then can they truly call themselves a consultant.
They study how to protect their clients from fundamental mistakes that detract value and put their clients finances at risk.
In addition to improving expertise in helping clients increase their sale price, it also means the agent needs to focus on a second part of the equation. An equation the industry seems to totally ignore. The industry harps on and on about getting their clients the best price. “We’ll get you the best price because we have the biggest team… Do the most… Bla Bla Bla. But it’s not the sale price that is most important to the client – it’s the PROFIT. It’s how much they get to bank. PROFIT = INCOME (sale price) less EXPENSES (selling costs). My job is to maximise my clients PROFIT. Therefore, not only do I need to maximise their sale price – I also need to minimise their SELLING COSTS…. Learn how to eliminate unnecessary expenses – that do not ad value to the client. Expenses that simply waste resources should be eliminated. Take a decent look at the industry and you will find many areas where massive amounts of the clients money are squandered or used to increase the profile of the agent. Why can I not find anybody else in the industry talking about increasing their clients PROFIT? Because, and a lot of people don’t like it when I speak this truth… the real estate industry is a self focussed, commission driven beast that simply doesn’t give a crap about their clients Profit.

It makes agents more accountable for their actions, advice, and fees. e.g. they keep track of their appraisals compared to what the property actually sells for …in other words their ‘Appraisal Accuracy Rate’… are their appraisal skills up to scratch?

It means that agents must be more transparent with how, where and why they are spending their clients marketing funds – is it the clients best and most efficient use of those funds?. They must be more transparent with how much work has actually been done on behalf of each individual client – Most agents cannot tell you the average time worked on behalf of a seller – why? because it is not tracked. Why? Because most agents would struggle to justify their fee to the client if it was. Instead, the illusion is given to the client – that many hours are worked on their behalf (as already mentioned much of this time and effort is spent finding new clients – not working for the existing ones). I challenge you as an agent… to keep a time log for the next month. Record every action, and activity you do in 15 min blocks. Then separate out the so called ‘work’ that is not done on behalf of a client. If it is not working directly on the sale of their property – then it does not count. Prospecting does not count… then take a look – you will find that most real estate salespeople spend only 25 – 35% of their so called ‘working day’ actually being productive on behalf of their client. Oh.. by the way – standing at an open home hoping someone will turn up – is not working!

If you mean superior in the way of raising consumer SATISFACTION? Tick

It’s pretty bloody obvious that by shifting to a client focussed consultative culture. By being more efficient and helping clients bank more of their sale proceeds. By empowering clients to have more control over their outcomes, By being more trustworthy, more professional etc … That clients are happier with the entire experience.

If you mean superior in the way of raising AGENTS PRIDE in themselves & the industry. Tick

Truly focussing on protecting and helping clients – adding real value to them, being respected and trusted buy those clients, and being fairly paid for your knowledge, experience, expertise and work done… is a much nicer and more satisfying place to be… in my book 🙂

Anyway enough ranting for today.

I don’t have a clue who this person “Logen” is? However… “we must be realistic about these things” … sounds like words spoken by someone who doesn’t believe it can be done… Can’t remember who said it, but these words come to mind… “He who doesn’t believe it can be done, should get out of the way of those doing it” 😉

Rob, you have done a masterful job elucidating the industry’s greatest weakness. As the broker-owner of an agency that strives to maintain an all-counselor team, I can attest to the inherent conflict that exists between putting quality over quantity and the bottom line. Doing what’s right for the sake of doing what’s right is not always easy.
It also occurs to me that there is no fine line between facilitator and counselor. There are many who fall in the 80% that have some decent counselor skills, and who would someday make a fine counselor with training and experience. We must be careful not to throw the baby out with the bath water.
Lastly, I am 100% certain that if the industry starts outsourcing the nuts and bolts to an $8/hour person the problems that will require a counselor will skyrocket! Can you imagine if that guy who helps you troubleshoot your bad internet connection (who always seems to be watching TV or playing a video game) was the same one who was responsible for overseeing your escrow deposit?!?!

This is one of the best articles that I have read explaining the state of our industry in 2016. You nailed it. Brokerages aren’t going to change it, licensing boards aren’t going to change it, and NAR doesn’t seem to have any interest as well. Has any action been taken since the DANGER report?